Effort to attract head offices to Vancouver starts to pay off

Chuck Chiang, Vancouver Sun04.02.2016

Shi Junying, chairman of Bioland Environmental Technologies Group, which plans to run its expansion worldwide, outside East Asia, from Vancouver.Handout

Bioland Environmental Technologies Group, at the companyís booth at Globe 2016 in Vancouver. Bioland is among a number of Chinese firms making major investments in B.C., with plans to set up its North American headquarters and an R&D facility in the Lower Mainland. March 4, 2016Chuck Chiang

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VANCOUVER -- Shi Junying can’t stop gushing about how well Vancouver fits every facet of his company’s international growth strategy.

“Here, we can find people with competencies covering almost every market and culture of the world without leaving the city,” said Shi, chairman of Bioland Environmental Technologies Group.

“You don’t see this in other places we looked at. It’s a big help for expansion to other global markets.”

Bioland is one of China’s largest waste-management firms. Its service area has a population of 30 million. It chose Vancouver over competitors such as Seattle last year for its North American headquarters and will open a permanent office this year.

The initial numbers are small, with a planned 15 employees dedicated to sales and marketing of the company’s treatment technology for biological waste. But Shi said his plan is to have 200-plus team members in the Lower Mainland in 2021, with people in research and development, site construction and management, investment and project operations.

The goal is $100 million in annual business within three years, with total investment in the Lower Mainland likely hitting $300 million at that point, Shi said. The Vancouver office will handle all of Bioland’s global activities outside of East Asia.

“We are trying to become a global company,” Shi said. “At the same time, we want to hire local, because we want to be local company in the markets we serve,” he added.

When people speak of Chinese investment in B.C., much of the conversation centres on Metro Vancouver’s daunting housing prices. Less visible is the corporate investment — both within the Lower Mainland and throughout the province — that has the potential to kickstart several sectors of the economy.

HQ Vancouver is a joint federal-provincial organization created to persuade companies to set up regional headquarters in Vancouver. So far, the half dozen who have come have all been Chinese, partly because many Chinese businesspeople had already emigrated to B.C. and were looking to “align business and family interests,” said HQ Vancouver president Yuen Pau Woo.

China has many companies at the stage where they are seeking a global platform, said Teresa Wat, B.C.’s minister of international trade. And unlike major corporations from countries like Japan, South Korea and Western Europe, they don’t have an established preference or relationship with another North American city, she added.

“It’s easier to target emerging companies that haven’t established themselves globally, so we are targeting them first,” Wat said.

Companies on that list include Aikang, a medical and health care investment fund manager; F-Pacific Communications, the local subsidiary of China Fiber Optic Network Systems, which has already invested $50 million in B.C. and will set up a plant in Surrey that will employ 200 people; Istuary Innovation, a start-up incubator; Zhiye Photoelectric, which specializes in photo-etching technology and plans to reach $5 million in annual production within a few years; and Poly Culture North America, the local branch of China’s biggest art auction house and a major theatre/cinema management group.

Local companies, from fields as far apart as fashion and aquaculture, are also reaching to China for investors to help them expand.

Drew Green, CEO of Indochino, said Vancouver appears to be gaining a good reputation among Chinese businesspeople.

“They (Dayang) really admired our strength in technology and creating a brand,” he said. “I think this is a celebration for technology and retail in Vancouver.”

Chinese and Canadian partnerships do not always succeed, especially in resource sectors such as energy and lumber.

For instance, B.C. reached a memorandum of understanding with China New Energy Chamber of Commerce — made up of a group of Chinese enterprises — in 2013. The interest, which officials said at the time could result in up to $1 billion investment in Canada, centred around Chinese interest in B.C. wood pellets as a source of energy that’s cleaner than coal.

As of today, said Pinnacle Renewable Energy — one of B.C. stalwarts in the wood pellet industry — business from China “is not much of a story. “

“We had some interest early on, but not much recently,” Pinnacle CEO Rob McCurdy said in an email, noting exports this year went to Japan, while last year’s clients included South Korea, but not China. He added, however, that officials “still believe that the Chinese market has significant potential in the future.”

David Cohen, a professor in UBC’s department of wood science, specializes in business management and international trade. Cohen said after an initial deluge of Chinese investment in resources in B.C. and globally by Chinese state-owned enterprises in the past decade, the pace has slowed considerably.

“Recently, because of the oversupply in commodity as well as the slowdown of economic growth (in China), they’ve backed off quite a bit,” Cohen said. “For a while there, it was a race to secure as many resources as they could, and they paid some silly prices for things. My guess is they are regretting most of their investments in the oilsands.”

Jing Li, associate professor of international business at SFU’s Beedie School of Business, is researching the contribution of Chinese investment to the Canadian economy. Li said the three Chinese mining companies she has spoken to so far — all entered Canada in recent years by acquiring a B.C. company — all experienced difficulties not unlike those seen by any foreign companies when they first enter an unfamiliar market.

“When they started this acquisition wave in Canada, they’ve made so much money in China that … maybe they were overconfident,” Li said. “They made lots of strategic mistakes when they entered the market, and they underestimated the challenges of doing business in Canada.

“The rules of the game is so different versus what it was in China. … One of the companies said, had they known earlier, they would have chosen a partial acquisition or a joint-venture because a full acquisition does not allow as much of drawing on local expertise as what a partnership provides.“

However, Li said it is unlikely these cases of “speed-bumps” will derail Chinese investment in B.C., noting China’s acute need for resources and green technology and B.C.’s strong standing in both as naturally complementary.

UBC’s Cohen said the most valuable investment the Chinese make in B.C. may not be money, but people, through immigration and integration into the Canadian community.

“Where I live in White Rock, six of the last seven properties sold around me in the last few years have been sold to Chinese buyers,” he said. “But two of them, including my neighbour, are people who moved here. The adults are taking English classes, while the kids already speak pretty good English and going to high school.”

“You look at the large number of small vegetable markets that the West Coast has, whether you are in Delta, Surrey or Vancouver. Hundreds of these great little establishments, and they are almost solely run by Asian immigrants. They work their butts off, they deserve everything they make, and they generate jobs,” Cohen said.

Their children will stay on as citizens and continue to contribute, he said.

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Effort to attract head offices to Vancouver starts to pay off

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